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Thursday, Mar 28, 2024

Anthem Breach Far From Fatal

Will the massive data breach at Anthem Inc. shrink its market share? Probably not, says one expert. And an analyst who follows the company foresees no impact on its share price, either. The Indianapolis insurer, which has 37 million current clients nationwide, disclosed on Feb. 4 it was hit by hackers who compromised databases containing Social Security numbers, birth dates and other personal information of up to 80 million current and former policy holders. The company’s Anthem Blue Cross subsidiary in Thousand Oaks is California’s largest for-profit health insurer and serves 8 million state residents. Barry Cohn, chief executive of insurance brokerage and consulting firm RGEB Employee Benefits in Woodland Hills, said that nothing so far that would indicate Anthem will lose customers in California. Among the other insurers with small group plans that compete against Anthem in California, Aetna Inc. is more expensive and Health Net Inc., in Woodland Hills, is comparable in price, Cohn said. “It is too early to tell whether there will be an effect on market share. My gut instinct is to tend to doubt it,” Cohn said. RGEB has about 300 customers that have Anthem coverage, and the agency received phone calls from some of them with questions about the cyber-attack. Material provided by Anthem was passed along to individual, senior and group plans, Cohn said. Vishnu Lekraj, an analyst who follows Anthem at Morningstar Inc. in Chicago, said that while the breach was significant, the share price has not moved down because of it. Also, the risk of costly legal action has not materialized as of yet. “Even if there were significant legal costs associated with this, it’s not going to affect the stock value,” Lekraj said. The company’s cash flow and profitability makes it able to sustain any legal expenses, he added. The company had net income of $2.6 billion on revenue of $68.4 billion last year. Shares in Anthem closed at $137.65 the day the data breach became public. The price dropped to a low of $134.88 a few days later before rebounding and closing at $141.84 on Feb. 18. There has been fallout, of course, fromt eh breach. State and national consumer advocacy groups have been critical of Anthem, and California Insurance Commissioner Dave Jones has launched an investigation. Anthem also was forced to issue a warning to consumers to beware of scams, such as emails that appear to originate from Anthem and ask for personal information. So far there has been no indication that any of the information obtained by the hackers has been sold on the black market. Anthem has responded well in keeping brokers and customers informed about the attack and what can be done to protect themselves going forward, Cohn said. The company has offered to provide victims free credit monitoring and identity theft protection for two years. “We have been getting emails once a day with updates,” Cohn said. “Anthem has been on top of it.” The company’s most recent communication on Feb. 14 offered its members and former members identity theft repair and credit monitoring services free for two years. Anthem also has retained Mandiant, a cyber-security firm in Alexandria, Va. to analyze its systems and ensure data is safe going forward. The Anthem hack is among the largest data breaches in history. A breach at Target Corp. in 2013 compromised credit card information of 40 million customers, and a hack last summer at JPMorgan Chase potentially exposed the names, addresses, phone numbers and email addresses of 83 million customers. Security issues over customer data are not new to Anthem. In 2013, the company, then known as Wellpoint Inc., paid a $1.7 million penalty to settle allegations that it left the health information of more than 600,000 people vulnerable because of security weaknesses.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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